Investment Banking | Income JPMorgan 's 2 Nd Quarter Stands On Its Investment Banking Fees, But Problems Persist Litigation

NEW YORK, NY - JPMorgan Chase surprised Wall Street on Thursday with a sharp increase in investment banking revenue at a time when other banks are warning of layoffs due to slowdown in trade.

Investors were awaiting the results of investment banking at major Wall Street firms to reduced fears of a slowdown after Goldman Sachs Group Inc. said it plans to eliminate 230 jobs from September. Citigroup analyst Keith Horowitz has warned that revenue from general negotiating bank debt would probably decline 30 percent in the second quarter, the stock trades at 15 percent. The reason: Investors cutting back on trade due to market volatility caused by the debt crisis in Europe.

As expected, revenues from JPMorgan Chase Co. 's negotiation dropped "18 percent fixed income and 14 percent equity from the previous quarter. However, the bank was more than offset the difference with higher fees from underwriting stocks and bonds. That raised the earnings of JPMorgan 's 13 percent in the three months ended in June.

The Bank of New York earned $ 5.4 billion, or $ 1.27 per share for the three months ended in June. That was up from $ 1.22 per share that analysts polled by FactSet expected. JPMorgan earned $ 4.8 billion, or $ 1.09 per share, in the same period a year ago.

JPMorgan 's rose 1.8 percent to close at $ 40.35 Thursday.

The investment banking revenue rose 49 percent to $ 2.1 billion. The bank set aside $ 2.6 billion to compensate their investment bankers, down from $ 2.9 billion in the same period last year. JPMorgan 's subscription fees of the debt increased 24 percent, equity underwriting fees increased 29 percent, while fees advising on mergers and acquisitions rose 69 percent.

JPMorgan shareholder Benjamin Wallace of Grimes Co. in Marlborough, Massachusetts, which manages $ 1.1 billion in assets, said earnings from investment banking, "reflects the strength of JPMorgan's franchise 's diversified".

At the same time, Wallace said he was concerned about the reserves of the bank s ever-expanding litigation. JPMorgan 's chief financial officer Douglas Braunstein said the reserves to fight the demands of investors and law enforcement agencies increased by $ 1 billion to $ 9.7 billion.

"We believe our current reserves are our best guess ... for a whole host of issues related to foreclosure complex ... as well as payments to other settlements such as the Department of Justice, state attorneys general and others," said Braunstein in a conference call with analysts on earnings.

JPMorgan and other big banks have settled several disputes with regulators and investors in recent weeks, but the work is far from over. Many problems are due to banks selling mortgage-backed securities that lost value during the housing crisis.

Bank of America Corp. reached a settlement with investors in late June to pay $ 8.5 billion by selling them low quality mortgage bonds. JPMorgan agreed to pay $ 154 million, also in June, the Securities and Exchange Commission over allegations that the bank had misled the buyers of the complex mortgage investments. And the July 7, JPMorgan agreed to pay $ 211 million to government regulators and the Justice Department after admitting one of its divisions rigged dozens of offers to win business from state and local governments.

JPMorgan Consumer 's lending business failed in the second quarter. Despite low interest rates, the bank lost $ 454 million in its auto and mortgage lending, compared with income of $ 364 million in the previous year. People took out fewer loans for cars and executions continued damage to the mortgage business.

Credit JPMorgan 's business card did relatively well. Customers of the bank s from 10 percent over their cards. At the same time, JPMorgan cut its loan loss reserves by $ 1 billion as more people pay their bills on time.